Marc Walton on August 4, 2013
Hi Everyone!!!As you may have guessed, Marc Walton is taking some much deserved time off of his super-busy schedule and letting me do the weekly blog! Yaaayyy!!! My name is Omar Eltoukhy and I have been a long-time student of Marc’s. I was one of the original members of Forex Mentor Pro and am happy to report I now make a full-time living from forex. I owe it all to Mr. Walton and this site. Without his guidance and showing me the way, I would still probably be stuck looking for the “holy grail” system. When the whole time, the real holy grail is just becoming a good trader with an understanding of the market. Of course, my biggest advancement in learning came with one major discovery: SUPPORT AND RESISTANCE REALLY WORKS!!!
Before my joining FMP and learning about S/R (support and resistance), price action and movements always seemed a mystery to me. I was one of those traders always using 500 different indicators which worked sometimes but not others. I could never understand why I could never keep up with what was going on!! This oscillator worked one time, but not the next. These two indicators worked great in a trending market, but failed in a ranging one. I was constantly searching for the “ultimate indicator” to improve my trading when it was there the whole time, literally, RIGHT IN FRONT OF ME!!
Yes, it’s just that simple. Find where price has reacted strongly before, and not only will you have an area to trade from, S/R is the ONLY thing I have found so far that is PREDICTIVE!! No more rearward-facing indicators and oscillators constantly telling me what has already happened. No longer did I need to figure out what kind of market was I trading to figure out what tools to use. Support and resistance works in ALL MARKETS with the exception of some very low volume weeks and holiday weeks where price action is simply ridiculous and no one in their right mind should be trading anyway. Forex Mentor Pro and the great teachers here taught me that the best indicator was price itself. Such a simple concept. Of course, it is not always an exact science. The reason it works is because SO many other traders out there are using it and when large volumes of traders/capital all place the same orders in the same place, price reacts. Soooooooo, how do you figure out which support and resistance to use??
1) Look at higher timeframes: When price reverses or reacts strongly at a certain point on the monthly, weekly or daily charts (especially multiple times in the same area), it is likely to do so again in the future.
2) Look at big whole numbers: This is simple human psychology. Since the market is merely a reflection of aggregate human actions, and humans are acting based on psychology, the market moves are reflective of the collective mindset of the traders. And people LOVE whole numbers. Easy to remember. And the bigger the whole number, the better. Remember, the more “zeros” after the price, the more likely it will be a place for important S/R
3) Use big EMAs. Exponential Moving Averages like the 55 and 200 on larger timeframes are essentially dynamic S/R and can control price and give lots of information as to what price may do next.
4) Go Ahead, Fib a little! Learning to use Fibonacci on larger moves will give you insight into some very important S/R areas. The mathematician was a genius and figured out certain %’s go with the harmony not only in trading, but explain lots of things in life. Use his research to your advantage……….lots of smart traders do!!
5) Practice, Practice, Practice makes Perfect! If it were too easy or “cut and dry” we could simply create and indicator to show us all the important levels. From my experience, this is simply not possible. Reason? Sometimes VERY important S/Rs are in “weird” places, and not regularly spaced apart. Only practicing identifying the really important areas will yield consistently good S/R areas. But it’s the fact that it can’t be mathematically calculated automatically that leaves the door open to these areas really working. Getting good at forex is like any other complex craft; you must practice to be good at it.
Now I’m not saying that S/R is the “be all, end all” way to trade. There are plenty of other useful tools in the trading arsenal that can be used successfully in trading the market. But if you are new to forex, or are struggling in the constantly changing markets; getting more proficient at using support and resistance might just be the ticket to better trading!! So now let’s put it to the test and see how it works this week!
Forex Week Ahead
After a week of HEAVY news and a monthly candle close, it seems the stage is set for this week to be a great week to trade. Only problem is now we are in August, and we may be hitting the summer “doldrums” of trading; ie: ranges or flat markets. That being said, almost every pair’s bollinger bands are telling us that the markets are still very tradeable and capable of movement. I didn’t see a single “bollinger squeeze” on any pair to which I have done analysis. Oh, and Marc’s are some pretty big shoes to fill, so don’t be too tough on me about the analysis!! I owe him a debt of gratitude in helping me reach the point I have, but I never forget he is the master and I am the eternal student. Let’s see what I’ve dug up!!
Euro/$: NFP is usually a great day to do anything except trade. Interestingly enough though, as volatile as that news may be, the Eur/Usd VERY much respected its S/R areas. Stopped right under 1.3300 after a crazy move up. Where to go from here?? Well, price seems to be “stuck” in between 1.3200 and 1.3300 with 1.3300 being a VERY tough area lately to get through. Suggestion? Short at 1.3300 and long at 1.3200 while price stays ranging between this area which coincidentally is between the 55 EMA and the 200 EMA on the MONTHLY chart. A breakout above 1.3300 for an M2 long would be desirable as well as a short below 1.3200 if we break the range. All explained in the video.
Gbp/$: The monthly price action over the last few candles looks………well……yucky. Definitely no clear trend. We must look to smaller timeframes for guidance. It seems as price loves the area between 1.5270 and 1.5425. Longs from 1.5270 and shorts from 1.5425 would be my call until that range is broken on the daily. Then M2 short below 1.5270 or a long above 1.5425 would be in order. A fall to 1.5000 would definitely have me interested for a long.
Aud: Looks much clearer than its Eur and Gbp counterparts against the dollar. Strong downtrend, BUT now outside the bollinger bands on the Monthly and Daily charts. A pullback to .9000 would be ideal for a short, but in case of a stronger pullback, .9300 again may be the best place to look for a short. Counter-trend traders will look for a break back above .9000 and .9040 for some longs to potentially get back there, but this pair may only pullback to .9000 before falling further. Explained in the video
Euro/Gbp: Another pair stuck in a triangle. Has gotten a little jittery lately. A pullback to .8600 would be my preferred trade if taken long from this area. Alternatively a breakout above the triangle and .8750 for an M2 trade long would be an option. Although this pair is usually very easy and smooth to trade, recent divergent and choppy price action on both the Eur and Gbp has made this pair a little more difficult lately. See video for more details.
$/Yen: After a HUGE upswing that started last Fall, this pair has started to go sideways as summer is upon us. We seem to be moving downward at the moment in small channel. A pullback to 100.00 would have me interested in a short, OR a drop down to 97.50 for a long. Both areas are the boundaries of this new price channel and a strong horizontal S/R. More conservative traders will want to wait until a stronger move is made on this pair to trade it.
Euro/Yen: Normally my favorite pair to trade, the Eur/Jpy has been a bit volatile lately. Following the Usd/Jpy, it has made a spectacular move up since the Fall of 2012. Seems to be going a bit more sideways at the moment. Longs from 130.70 and finally 130.00 would interest me as well as shorts from the recent high and strong resistance of 132.50. Breaks of either area will have me more interested in an M2 breakout trade.
Aud Yen: Although I missed the short from 93.00 a couple of weeks ago, this pair seems to be in a nice downtrend. With the breakout of a long-standing trendline and the major whole number of 90.00 on the weekly chart, a pullback to 90.00 for a short would interest me greatly. If price continues to fall, look for 86.00-86.30 for longs as below this areas there is PLENTY to hold price up. Check video out for more details.
Cad: By far my LEAST favorite pair to trade, it does seems to be offering opportunities. Look for shorts under 1.0400 and my preferred trade of a long at 1.0250-1.0275 as we have both a 200 EMA and a trendline there.
New members please note: If I am looking to take a trade long, at for example 1.5000 , I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.
We are NOT a “tipping service” our aim is to teach you how to trade for yourself. For more up to the minute updates do not forget to drop by the forum
Hope you enjoy the analysis!! See you Wednesday for an update!! Best wishes and happy trading to all!!!
To view the video click on the link http://youtu.be/izf4a6IPcaU